BofA Finance Launches $1 Million Contingent Income Buffered Auto-Callable Notes Linked to S&P 500

Structural Features and Coupon Mechanics of the Buffered Notes

The notes issued by BofA Finance LLC represent a structured equity-linked product designed to provide income through a contingent coupon mechanism tied to S&P 500 Index performance. The contingent coupon rate of 8.60% per annum, payable semi-annually at $43.00 per $1,000 in principal, is conditional on the S&P 500 closing at or above 80% of its starting value (the coupon barrier set at 6,057.92) on any observation date. This barrier structure creates a buffered exposure to moderate equity market declines, allowing investors to continue receiving coupon payments even if the index declines by up to 20% from its July 15, 2026 starting level of 7,572.40. The contingent payment structure means that if the underlying index falls below the 6,057.92 threshold on a given observation date, no coupon payment is made for that period, representing a departure from traditional fixed-income securities with unconditional payment obligations.

The notes carry minimum denominations of $1,000 and are offered in whole multiples of $1,000 above the minimum. The initial estimated value at pricing was $993.20 per $1,000 in principal amount, representing a discount to the $1,000 public offering price per note. The total offering size is $1,000,000 in principal amount, with no underwriting discount applied to the transaction. BofA Finance disclosed that the actual value of the notes at any time will reflect numerous factors and cannot be predicted with accuracy, emphasizing the complexity inherent in these structured instruments.

Automatic Call Provisions and Early Redemption Framework

The notes incorporate automatic call features that provide early redemption opportunities for the issuer if the S&P 500 Index performs strongly. Beginning with the July 15, 2027 Call Observation Date, the notes are automatically callable semi-annually if the underlying index closes at or above 100% of its starting value (the call value of 7,572.40) on any call observation date. Upon automatic call, the issuer pays the principal amount plus the applicable contingent coupon payment due on that date. The early redemption amount for each $1,000 in principal equals $1,000 plus the relevant contingent coupon payment if the coupon barrier condition is satisfied on that call observation date.

The call schedule establishes observation dates at semi-annual intervals beginning July 15, 2027 and continuing through January 15, 2030, with corresponding call payment dates occurring approximately five business days after each call observation date. This structure limits the potential holding period for investors to approximately four years unless the notes are called earlier, effectively capping upside participation for holders while the issuer benefits from strong equity market performance. If the notes are automatically called, no further payments are made, and investors' remaining coupon streams are eliminated. The filing indicates that all notes must be called together on any given call observation date—the issuer does not have the option to call partial amounts.

Redemption at Maturity and Downside Loss Provisions

For investors holding notes to maturity on July 18, 2030, the redemption amount depends on the S&P 500 Index level on the valuation date (July 15, 2030) relative to the threshold value of 6,057.92, or 80% of the starting value. If the ending value equals or exceeds the threshold value, investors receive the full principal amount of $1,000 per note plus a final contingent coupon payment if applicable. However, if the index declines below the threshold, the notes provide leveraged downside exposure, and investors can lose up to 100% of their principal investment. The filing explicitly states that if the underlying declines by more than 20% from its starting value at maturity, the investment will be "exposed on a leveraged basis to any decrease in the value of the Underlying beyond a 20% decline, with up to 100% of the principal at risk."

This structure creates an asymmetric risk profile where the buffer protects against modest declines of up to 20%, but magnifies losses beyond that threshold. Investors should note that while contingent coupon payments may be received during the holding period (assuming the coupon barrier is satisfied), these periodic payments do not offset or reduce principal loss exposure at maturity if the index declines significantly. The final contingent coupon payment at maturity is also subject to the coupon barrier condition, meaning investors may not receive the final coupon if the index falls below 80% of starting value, even if earlier coupon payments were made during the term of the notes.

Credit Risk and Guarantor Protection

All payments on the notes, including principal and contingent coupon payments, depend entirely on the creditworthiness of BofA Finance LLC as the issuer and Bank of America Corporation as the full and unconditional guarantor of the notes. The notes are not FDIC insured and are not bank-guaranteed by any government agency or deposit insurance program. Investors are exposed to the credit risk of both entities throughout the holding period. Bank of America Corporation's guarantee ensures that if BofA Finance fails to meet its obligations, BAC remains liable for the full amount of any payments owed to noteholders.

The pricing supplement confirms that payments are "subject to the credit risk of BofA Finance LLC ("BofA Finance" or the "Issuer"), as issuer of the Notes, and Bank of America Corporation ("BAC" or the "Guarantor"), as guarantor of the Notes." In the event of default by BofA Finance, the calculation agent (BofA Securities, Inc., an affiliate of BofA Finance) will determine whether a final contingent coupon payment is payable and will prorate any such payment to reflect the length of the final contingent payment period. The absence of a default interest rate means that investors will not receive additional compensation if the notes default, distinguishing these securities from some traditional corporate debt instruments.

Observation Dates and Payment Calendar Through Maturity

The notes establish a fixed schedule of observation dates and payment dates that run semi-annually from January 2027 through July 2030. Observation dates are scheduled for January 15, July 15 and certain dates adjusted for weekends and holidays: specifically January 15/21, July 15/20 for 2027; January 18/21, July 17/20 for 2028; January 16/19, July 16/19 for 2029; and January 15/18, July 15/18 for 2030, with the July 15, 2030 observation date serving as the valuation date for final redemption. Contingent payment dates—when coupon or principal payments are made—occur approximately five to six business days after each observation date. This schedule provides clarity to investors on when the underlying index will be measured and when payments will be made.

The filing notes that observation dates are subject to postponement under certain circumstances as described in the product supplement, specifically under "Events Relating to Observation Dates." These postponement provisions may extend the valuation date and corresponding maturity date if certain market disruptions occur, such as the non-trading of the underlying index or other extraordinary events. Investors should review the complete product supplement for details on conditions that trigger postponement, as such events could delay final payment and redemption of the notes beyond the scheduled July 18, 2030 maturity date.

Index Methodology and Underlying Performance Linkage

The notes are linked to the S&P 500 Index (Bloomberg symbol SPX), a price return index, meaning the index does not include reinvested dividends in its calculation. The starting value of the index used for all calculations is 7,572.40 as of the pricing date of July 15, 2026. This starting value serves as the baseline for determining whether all barrier conditions are met: the coupon barrier of 6,057.92 represents 80% of starting value, the call value of 7,572.40 represents 100% of starting value, and the threshold value of 6,057.92 equals 80% of starting value for redemption purposes. The observation value at any point is the closing level of the S&P 500 Index on the applicable observation date or call observation date.

The notes do not provide direct exposure to the total return of the S&P 500, nor do they benefit from dividend reinvestment. Instead, investors receive fixed contingent coupon payments if index levels meet the coupon barrier, automatic call proceeds if the index reaches the call value, or a redemption amount at maturity determined by comparison of the ending index value to the threshold. The calculation agent, BofA Securities Inc., is responsible for determining all observation values and making related calculations. This dependence on a single pricing agent highlights the operational risk embedded in these structured products and the importance of understanding the calculation methodology.

Valuation and Market Value Considerations

The initial estimated value of the notes as of the pricing date of July 15, 2026 was $993.20 per $1,000 in principal amount, representing a discount of $6.80 per note to the public offering price of $1,000. This gap between initial estimated value and offering price reflects the embedded costs of structuring, distribution, and ongoing administration of these complex instruments. The pricing supplement explicitly warns that "the actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy," acknowledging the challenges in valuing equity-linked structured products in secondary markets.

Investors should understand that structured notes of this type typically experience significant changes in value between issuance and maturity based on movements in the underlying index, changes in volatility expectations, and shifts in credit spreads for the issuer and guarantor. The notes are not listed on any securities exchange, meaning they trade over-the-counter through dealers if secondary market liquidity is available. BofA Finance and affiliated dealers may make markets in the notes, but investors face the risk that secondary market liquidity may be limited or unavailable at attractive prices, particularly in stressed market environments.

Registration and Regulatory Compliance Framework

The notes are issued pursuant to a Registration Statement on Form S-3 with registration statement numbers 333-290665 and 333-290665-01, filed with the Securities and Exchange Commission. The pricing supplement is filed as a 424(b)(2) prospectus supplement under SEC Rule 424(b)(2), which permits the use of a prepared form of prospectus. The offering incorporates by reference a prospectus dated December 8, 2025, a Series A Prospectus Supplement dated December 8, 2025, and a Product Supplement EQUITY-1 also dated December 8, 2025. Investors should review all prospectus documents to understand the complete terms, risks, and conditions governing the notes.

The pricing supplement includes a standard SEC disclaimer stating that neither the SEC, state securities commissions, nor other regulatory bodies have approved or disapproved the securities or determined whether the pricing supplement and accompanying documents are truthful or complete. The disclaimer further notes that any representation to the contrary constitutes a criminal offense. The CUSIP number assigned to the notes is 09712GKA1, which investors should use for trading and confirmation purposes. Potential purchasers are directed to review the "Risk Factors" section beginning on page PS-9 of the pricing supplement and additional risk disclosures in the accompanying prospectus supplement and prospectus.

Risk Factors and Investor Considerations

The structured notes carry multiple layers of risk that distinguish them from conventional fixed-income or equity securities. The most significant risk is principal loss exposure: if the S&P 500 Index declines more than 20% from its starting value by the maturity date, investors face leveraged downside exposure with the potential to lose up to 100% of their principal investment. This represents a fundamental difference from equity index funds or mutual funds that provide proportional exposure to index movements. Additionally, the contingent coupon mechanism means that coupon payments are not guaranteed; if the index falls below the 80% coupon barrier on any observation date, no coupon payment is made for that period, reducing total return even if the notes ultimately mature at par.

Credit risk of BofA Finance and Bank of America represents another material consideration. While BAC's guarantee provides a layer of protection, investors are ultimately dependent on BAC's continued financial health and creditworthiness. In scenarios of severe financial stress, BAC's credit spreads may widen, reducing the secondary market value of the notes even if they remain capable of payment. Liquidity risk is also significant: the notes do not trade on an exchange, and secondary market liquidity may be limited or unavailable. Investors who wish to exit their positions prior to maturity may face wide bid-ask spreads or may be unable to find buyers at favorable prices. The contingent nature of coupon payments adds complexity risk, as the interaction between index performance and payment dates requires careful monitoring to understand actual realized returns.